Stylized facts of governance, institutions and economic development. Exploring the institutional profiles database
AbstractThe empirical literature on economic growth agrees that institutions and governance are important determinants of long-run economic growth rates. As a stylized fact, this literature points to a strong correlation between the level of GDP per capita and the general development level of institutions and governance. However, the growth rate of GDP per capita itself, as well as other indicators that are broadly associated with the level of economic development, are generally much less strongly correlated with the level of institutional development. We document these correlations, and argue that there is a need for a broader set of stylized facts about institutions, governance and economic development, covering the broader set of economic indicators, including the growth rate itself. To find such stylized facts, we use canonical correlation analysis. We use a database on institutions and governance that has a very large number of indicators, and our analysis produces a number of aggregated measurements of institutions and governance that broadly correlate with patterns of economic development. The analysis confirms the correlation between the general level of economic development on the one hand, and institutional development on the other hand, which is the core stylized fact identified in the literature. In addition to this, our analysis points to the general attitude towards markets, and the level of financial development as specific dimensions of the institutional and governance characteristics of a country that correlate highly with specific development patterns. In particular, we find that a positive attitude towards markets combined with a low level of financial development goes together with growth rates, based on catching-up. We also find that a tendency towards market steering combined with strong financial development goes together with a high involvement in international trade (openness), combined with a low investment rate.
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Bibliographic InfoPaper provided by United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology in its series UNU-MERIT Working Paper Series with number 036.
Date of creation: 2012
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Web page: http://www.merit.unu.edu
institutions; governance; economic development;
Find related papers by JEL classification:
- O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
- O43 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-15 (All new papers)
- NEP-CWA-2012-05-15 (Central & Western Asia)
- NEP-DEV-2012-05-15 (Development)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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